U.S. natgas eases to 1-yr low as warm weather causes worst start for year

U.S. natural gas futures eased to a fresh one-year low on Friday on forecasts for warmer-than-normal weather and lower than usual heating demand to continue into late January.

With the contract down about 17% so far this year, the gas market had its worst start to a year on record, according to Refinitiv data going back to 1991, the first full year of trade for the gas futures contract.

That tops the current worst four-day start to a year of down 14% in 2006, and compares with the best four-day start of up 21% in 1997.

Low heating demand during what is usually the coldest part of the year should allow utilities to leave more gas in storage than usual this month.

Front-month gas futures NGc1 for February delivery fell 1.0 cent, or 0.3%, to settle at $3.710 per million British thermal units (mmBtu), their lowest close since Dec. 30.

Earlier on Friday, the contract dropped more than 5% to $3.52 per mmBtu, its lowest intraday price since July 2021.

For the week, the front month fell about 17%, putting it down about 44% over the past three weeks, its biggest three-week drop in history, according to Refinitiv data.

That keeps the contract in technically oversold territory, with a relative strength index (RSI) below 30 for a seventh day in a row for the first time since April 2019.

Traders said the market’s biggest uncertainty remains when Freeport LNG will restart its liquefied natural gas (LNG) export plant in Texas.

After several delays from October to November and then to December, Freeport now expects the facility to return in the second half of January, pending regulatory approvals.

Analysts have long been saying that Freeport would likely return during the first or second quarter of 2023 because the company still has a lot of work to do to satisfy federal regulators, including training staff in new procedures, before restarting the plant.

Whenever Freeport returns, U.S. demand for gas will jump. The plant can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG, which is about 2% of U.S. daily production.

Freeport shut on June 8 after a pipe failure caused an explosion due to inadequate operating and testing procedures, and human error and fatigue, according to a report by consultants hired to review the incident and suggest corrective actions.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 98.2 bcfd so far in January, up from 96.7 bcfd in December but still below the monthly record of 99.9 bcfd in November 2022.

Even though the weather is expected to remain warmer than normal through late January, Refinitiv projected average U.S. gas demand, including exports, would jump from 110.8 bcfd this week to 121.8 bcfd next week as temperatures ease ahead of what are usually the coldest weeks of the year.

In two weeks, however, Refinitiv projected gas demand would ease to 120.5 bcfd as the weather turns more mild.
Source: Reuters (Reporting by Scott DiSavino; Editing by Chizu Nomiyama and Jan Harvey)